Coding
Do you have the right employment contracts?
Why employment contracts are important for a small business
Written contracts of employment are not mandatory in Australia. Some Modern Awards or Enterprise Agreements do require employees and their employees to agree to certain things in writing, such as minimum part time hours of work, days and times when work will occur and flexible work arrangements. However, in general there is no overarching statutory obligation for working arrangements to be recorded in writing.
Written contracts of employment are not mandatory in Australia. Some Modern Awards or Enterprise Agreements do require employees and their employees to agree to certain things in writing, such as minimum part time hours of work, days and times when work will occur and flexible work arrangements. However, in general there is no overarching statutory obligation for working arrangements to be recorded in writing.
Why employment contracts are important for a small business
Written contracts of employment are not mandatory in Australia. Some Modern Awards or Enterprise Agreements do require employees and their employees to agree to certain things in writing, such as minimum part time hours of work, days and times when work will occur and flexible work arrangements. However, in general there is no overarching statutory obligation for working arrangements to be recorded in writing.
Written contracts of employment are not mandatory in Australia. Some Modern Awards or Enterprise Agreements do require employees and their employees to agree to certain things in writing, such as minimum part time hours of work, days and times when work will occur and flexible work arrangements. However, in general there is no overarching statutory obligation for working arrangements to be recorded in writing.
EMPLOYMENT CONTRACTS
What does this mean in the context of the employment contract?
Importantly, it does not mean that a contract of employment is not required. It simply means that the contract of employment does not need to be recorded in writing.
A ‘contract’ is simply any promise, or binding agreement between two parties that has the four essential elements of a contract. Those key elements are:
A ‘contract’ is simply any promise, or binding agreement between two parties that has the four essential elements of a contract. Those key elements are:
- There is an offer;
- There is acceptance;
- There is an intention to create a binding legal relationship; and
- There is consideration (in other words, the contract involves an exchange. In the case of employment, the exchange that occurs is labour in exchange for a wage).
The essential elements of a contract can be achieved through either a verbal or written agreement.
In practice, this means that where an employment relationship exists, so too does a contract of employment, whether you have elected to record the agreement or not.
Whilst this is not unlawful (unless there are specific things required to be agreed in writing by an Award or Enterprise Agreement), it represents a significant risk to any employer, particularly if a dispute were to arise later on in the employment relationship. In this sense, one should consider a written contract of employment as an important source document that can clearly identified what was agreed to upon commencement.
Employment contracts can include a range of terms, provided what is being agreed to is not inconsistent with the law, or a minimum term of an Award or Enterprise Agreement.
However, at their most basic level employment contracts should contain the following:
In practice, this means that where an employment relationship exists, so too does a contract of employment, whether you have elected to record the agreement or not.
Whilst this is not unlawful (unless there are specific things required to be agreed in writing by an Award or Enterprise Agreement), it represents a significant risk to any employer, particularly if a dispute were to arise later on in the employment relationship. In this sense, one should consider a written contract of employment as an important source document that can clearly identified what was agreed to upon commencement.
Employment contracts can include a range of terms, provided what is being agreed to is not inconsistent with the law, or a minimum term of an Award or Enterprise Agreement.
However, at their most basic level employment contracts should contain the following:
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The parties:
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- Who is a party to the contract.
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The position:
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- What position has the person been employed in?
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Payment terms:
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- Obviously terms related to payment are key to establishing an employment contract. These terms should include the amount that has been agreed to, the frequency of those payments and in what circumstances the amount may increase. If the payment is inclusive of other amounts (e.g., a fixed rate or salary), the contract should also specify what is included within that amount.
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General Terms relating to the National Employment Standards:
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- Whilst many of these may be reflected in the legislation, it is important to document what the general terms of the engagement are. This should include, what the employee's ordinary hours of work are; what leave entitlements apply to the employee, what notice is required by either party to terminate the contract of employment etc.
In addition to the above, employers may wish to include other terms that are relevant to their business or their industry. These may include confidentiality terms or restraint of trade/non-compete clauses. These require careful drafting; however, they are often important to protect the business both during and after the employment period.
The key takeaways for small businesses are:
The key takeaways for small businesses are:
- An employment contract is likely to exist whether its written down or not.
- The interests of both parties are best met by having a written contract of employment.
- Contracts should include some key terms, but should also reflect the specific interests of the business.
If you require further assistance in drafting employment contracts for your business, contact Clyde Industrial today on 1800 954 696.
